Amazon is in serious financial trouble with its Alexa device division as reports show the company has lost billions of dollars over the past five years.
From 2017 to 2021, Amazon’s devices division, which includes the Echo smart speaker, lost a total of $25 billion. In 2022 alone, the Alexa division lost $10 billion. This huge number forced Amazon to lay off hundreds of employees from the Alexa division by the end of 2023. This is a sad reality for a product that was once expected to be Amazon’s “golden goose”.
While Amazon's strategy of selling hardware below Capital to attract customers has helped it achieve an impressive 400 million Alexa devices in 100 million households by early 2023, the financial reality is less rosy.
This business model is similar to printers and razors, where companies need to take initial losses to make money on ink and blades. But with Alexa, Amazon seems to have yet to find a way to generate sustainable profits.
It’s not just Amazon, other tech giants like Google and Apple are also struggling with their virtual assistants. Consumer enthusiasm for Google Assistant and Siri has waned significantly in recent years. Samsung has even stopped developing Bixby, andMicrosoft has also killed Cortana.
However, neither Google nor Apple has given up on developing virtual assistants. Apple introduced new improvements to Siri at WWDC in June 2023, while Google has also confirmed that it will upgrade Google Assistant with Gemini artificial intelligence technology.
The core problem with Alexa, according to a former senior Amazon employee, is that it doesn’t live up to user expectations. The vast majority of requests for Alexa revolve around just three main tasks : playing music, controlling lights, and setting timers. That makes Alexa a multibillion-dollar “smart timer.”
To address this, Amazon has been working to attract third-party developers to create new skills for Alexa and improve the virtual assistant's conversational capabilities, but these efforts have yet to yield significant results.
Now, Amazon is betting on generative AI as a lifeline for Alexa. The company XEM a Generative AI-powered future for Alexa late last year. With platforms like ChatGPT’s superior natural language processing capabilities, generative AI is expected to make Alexa smarter and more helpful.
This November marks the 10th anniversary of Alexa and the Echo, and Amazon couldn’t have come up with a better time to reveal its vision for the next 10 years of its virtual assistant. But whether Alexa can survive another decade will largely depend on what happens in the next few months.
